M/s. Sutlej Motors Limited, Jalandhar V. The Dy. Commissioner of Income-tax, Jalandhar

ITA 56/ASR/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63451 (ITAT-AMRITSAR)
• Duration Of Justice: 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 08-08-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 14-02-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T P SINGH
• Assessee Lawyers: S S KALRA
• Keywords: Opportunity of being heard
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.56(ASR)/2012 ASSESSMENT YEAR:2006-07 PAN :AABCS9077R M/S. SUTLEJ MOTORS LIMITED VS. DY.COMMR. OF INCOME- TAX, JALANDHAR. RANGE-1, JALANDHAR. (APPELLANT) (RESPONDENT) I.T.A. NO.114(ASR)/2012 ASSESSMENT YEAR:2006-07 PAN :AABCS9077R ASSTT.COMMR. OF INCOME-TAX, VS. M/S. SUTLEJ MOTORS LIMITED RANGE-1, JALANDHAR. JALANDHAR. (APPELLANT) (RESPONDENT) ASSESSEE BY:SH. S.S. KALRA, CA RESPONDENT BY:SH. T.P. SINGH, DR DATE OF HEARING:08/08/2012 DATE OF PRONOUNCEMENT:27/08/2012 ORDER PER BENCH ; THESE CROSS APPEALS OF THE ASSESSEE AND THE REVENU E ARISE FROM THE ORDER OF THE CIT(A), JALANDHAR, DATED 19.01.2012 FO R THE ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL: 1. THE ORDER OF THE LD. CIT(A) IS AGAINST LAW AND FACTS OF THE CASE. 2 2. THAT THE LD. CIT(A) HAS ERRED IN SUSTAINING AN A DDITION OF RS.7,50,000/- TO THE VALUE OF WORK IN PROGRESS WHIC H IS WITHOUT ANY BASIS. 3. THAT WHILE SUSTAINING THE AFORESAID ADDITION OF RS.7,50,000/- THE CIT(A) HAS JUST PUT HIS OWN ESTIMATE WHICH IS N OT BASED ON ANY MATERIAL AND JUST ACTED ON SURMISES AND CONJECT URES. 4. THAT WHILE VALUING THE WORK IN PROGRESS THE STAT US OF EACH BUS BODY BEING FABRICATED AS ON 31.03.2006 WAS EXPLAINE D AND THE DEPTT. CANNOT BE EXPECTED TO HAVE ITS OWN YARD STIC K PARTICULARLY WHEN THE SAME IS GOING TO BE O/S OF NE XT YEAR. 3. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL: 1. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.20, 50,000/- OUT OF THE TOTAL ADDITION OF RS.28,00,000/- MADE ON ACC OUNT OF INCORRECT INPUT OF LABOUR & MATERIAL WHILE VALUING THE WORK IN PROGRESS DURING THE COURSE F ASSESSMENT PROCEEDINGS U/S 143(3) OF THE I. TAX ACT, 1961. 2. THAT, IT IS PRAYED THAT THE ORDER OF THE LD. CIT (A) BE SET-ASIDE AND THAT OF THE A.O. RESTORED. 4. THE BRIEF FACTS IN THE APPEALS OF THE ASSESSEE A ND THE REVENUE ARE THAT ASSESSE IS IN THE BUSINESS OF MANUFACTURING OF BUS BODIES AND INTEGRAL COACHES. THE ASSESSEE DECLARED SALES OF RS.19.58 CR ORES WITH GROSS PROFIT RATE OF 11.61% DURING THE RELEVANT PREVIOUS YEARS IN THE RETURN OF INCOME AS AGAINST THE GROSS PROFIT OF 10.94% IN THE PRECEDING YEARS. THE AO WAS OF THE VIEW THAT IN THE ABSENCE OF QUANTITATIVE PARTICULAR S OF RAW MATERIAL AND FINISHED GOODS IN THE TAX AUDITORS REPORT U/S 44AB OF THE ACT, THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE NOT CORRECT OR COMP LETE AND WERE NOT OPEN FOR VERIFICATION. HE ASKED THE ASSESSEE TO SUBMIT B RIEF DETAILS OF ITEMS 3 MANUFACTURED WITH RAW MATERIAL CONSUMED AND THE GRO SS PROFIT RATE IN RESPECT OF SUCH ITEMS. THE ASSESSEE, IN RESPECT OF CLOSING STOCK, CONTENDED THAT THE STOCK INVENTORY WAS TAKEN PHYSICALLY ON 31 .3.2006. THE CLOSING STOCK WAS STATED TO BE VALUED AT COST. THE AO OBSER VED THAT THE WORK IN PROGRESS SHOWN BY THE ASSESSEE IN CLOSING STOCK WA S RS.78,33,000/- 22 BUSES). HE FURTHER OBSERVED THAT AS PER TAX AUDIT R EPORT THE ASSESSEE HAD TWO FINISHED BUSES IN CLOSING STOCK WHEREAS THE PAR TICULARS OF CLOSING STOCK SUBMITTED BY THE ASSESSEE SHOWED 7 FINISHED BUSES I N STOCK VALUED AT RS.1,11,50,000/-. AS PER THE AO THIS SHOWED THAT TH E ASSESSEES ACCOUNTS DID NOT REFLECT THE TRUE STATE OF AFFAIRS. HE, THEREFOR E, REJECTED THE BOOK RESULTS REFERRING THE CERTAIN JUDICIAL DECISIONS IN THIS RE GARD. THE AO ALSO REFERRED TO CERTAIN JUDGMENTS ON THE POWERS OF THE AO ON ESTIMA TION OF INCOME. THE AO FURTHER HELD THAT IT WAS NOT VERIFIABLE WHETHER THE ASSESSEE HAD TAKEN INTO ACCOUNT CORRECT INPUT OF LABOUR AND MATERIAL WHILE VALUING THE WORK IN PROGRESS AFTER NOTING THAT THE ASSESSEE HAD CLAIMED WAGES OF RS.99.28 LACS, OUTSIDE LABOUR OF RS.8.12 LACS AND CASUAL LABOUR OF RS.26.98 LACS. IN VIEW O THESE FACTS, THE AO MADE AN ADDITION OF RS. 28 LACS AFTER CONSIDERING THE VALUE OF SEVEN FINISHED BUSES AT RS.1,11,50,000/- W HEN THE WORK-IN-PROGRESS FOR 22 BUSES HAD BEEN SHOWN AT RS.78,33,000/-. 5. BEFORE THE LD. CIT(A), THE ASSESSEE MADE THE SUB MISSIONS WHICH WERE SENT TO THE AO FOR HIS COMMENTS AND AFTER CONSIDERI NG THE SUBMISSIONS OF THE 4 ASSESSEE ON THE COMMENTS OF THE A.O., THE LD. CIT(A ) VIDE PARAS 5 TO 5.3 OBSERVED THAT PARTICULARS OF MATERIAL INPUT IN RESPECT OF THE BUSES IS NOT AVAILABLE AND THE VALUE OF THE WORK-IN-PROGRESS WOU LD ACTUALLY DEPEND UPON THE MATERIAL AND THE LABOUR INPUT IN RESPECT OF EAC H BUS AND ACCORDINGLY SUSTAINED THE ADDITION OF RS.7,50,000/- ON ESTIMATE D BASIS IN VIEW OF LOW VALUES OF CERTAIN BUSES SHOWN IN THE WORK-IN-PROGRE SS AND ACCORDINGLY PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 6. THE LD. COUNSEL FOR THE ASSESSEE, SH. S.S. KALRA , CA, ARGUED ON THE SIMILAR LINES WHAT WAS ARGUED BEFORE THE CIT(A) AND IN ADDITION ARGUED THAT THERE WAS NO DEFECT POINTED OUT BY THE AO IN THE BO OKS OF ACCOUNT AND THERE WAS NO BASIS FOR MAKING THE ESTIMATION, WHICH HAS B EEN MADE WITHOUT GIVING SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. 7. ON THE OTHER HAND, THE LD. DR, RELIED UPON THE O RDER OF THE A.O. AND ARGUED THAT THE ASSESSEE HAS NOT MAINTAINED THE STO CK REGISTER. THE WAGES AND LABOUR EXPENSES CLAIMED ARE NOT VERIFIABLE. THE STOCK DETAILS SUBMITTED BEFORE THE LD. CIT(A) DID NOT HAVE EVIDENTIARY VALU E IN THE ABSENCE OF THE STOCK REGISTER AND NON-VERIFIABILITY NATURE OF THE WAGES AND THE LABOUR THEREFORE, THE AO HAS RIGHTLY REJECTED THE BOOKS O F ACCOUNT AND HAS RIGHTLY ESTIMATED THE INCOME. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE I S NOT MAINTAINING STOCK 5 REGISTER. THE ASSESSEE VIDE REPLY DATED 18.12.2008 ALSO ADMITTED OF NOT HAVING MAINTAINED CONSUMPTION RECORD AS WELL. THE S TOCK INVENTORY PRODUCED HAS BEEN CLAIMED TO HAVE BEEN PREPARED ON THE BASIS OF PHYSICAL STOCK TAKEN AS ON 31 ST MARCH, 2006. IN THE ABSENCE OF ANY REGULAR STOCK REGISTER AND THE CONSUMPTION RECORD, THE ACTUAL QUA NTITY OF THE STOCK AND WORK-IN-PROGRESS CAN NOT BE RELIED UPON AND ACCORDI NGLY THE VALUATION SO MADE ON THE BASIS OF PHYSICAL STOCK TAKING CANNOT B E RELIED UPON. THEREFORE, THE AO HAS RIGHTLY REJECTED THE BOOKS OF ACCOUNT. I N VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT THE AO HAS RIGHTLY REJECTED TH E BOOKS OF ACCOUNT AND THE FINDINGS OF THE LD. CIT(A) THAT THERE WAS NO REASON ABLE GROUND FOR THE AO TO REJECT THE BOOK RESULTS, IS PERVERSE OF THE FACT S, AS ARISING FROM THE ORDER OF THE AO AND IN THE FACTS AND CIRCUMSTANCES OF THE PR ESENT CASE. AS REGARDS THE ESTIMATION OF INCOME, THE AO WHILE ESTIMATING THE I NCOME HAS NOT GIVEN THE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. HOWEVER, THE SAME WAS AVAILED BY THE ASSESSEE IN THE FORM OF SUBMISSIONS MADE BEFORE THE LD. CIT(A), WHICH WERE SENT TO THE AO FOR HIS COMMENTS AND THE ASSESSEE HAS SUBMITTED THE COUNTER COMMENTS ON THE COMMENTS OF T HE A.O. THE FACT REMAINS THAT THE ASSESSEE DOES NOT MAINTAIN STOCK R ECORD AND THE CONSUMPTION RECORD AND, THEREFORE, THE STOCK INVEN TORY OF THE WORK-IN- PROGRESS AND THE BUSES STILL REMAINS UNVERIFIABLE. THE ASSESSEE HAVING DECLARED BETTER G.P. RATE DURING THE YEAR AT 11.61% AS COMPARED TO 10.94% 6 IN THE PRECEDING YEARS AND IN THE ABSENCE OF STOCK REGISTER AND CONSUMPTION DETAILS AND THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND THE REMAND REPORT, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) AS REGARDS THE SUSTENANCE OF ADDITION OF RS.7,50,000/- ON ESTI MATION BASIS AND DELETING THE ADDITION OF RS.20,50,000/-. THUS, BOTH THE APPE ALS OF THE ASSESSEE AND THE REVENUE ARE DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.56(ASR)/2012 AND THE APPEAL OF THE REVENUE IN ITA NO.114(ASR)/2012 A RE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27TH AUGUST, 2012. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 27TH AUGUST, 2012 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. SUTLEJ MOTORS LTD. JALANDHAR. 2. THE ACIT/DCIT R-1, JALANDHAR. 3. THE CIT(A), JLR 4. THE CIT, JLR. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.